SARAWAK’S demand for an increase in oil royalty to 20% just got harder to fulfil, as Prime Minister Dr Mahathir Mohamad yesterday told opposition MPs from Gabungan Parti Sarawak (GPS) that he had “reservations” about the promise Pakatan Harapan made in its election manifesto.

Former works minister Fadillah Yusof, who led the 15 MPs to pay a courtesy call to the prime minister at the Yayasan Pemimpin Perdana in Putrajaya yesterday, told Kuching journalists today that Dr Mahathir said there were some “constraints” in implementing PH’s royalty promise.

The GPS MPs had earlier met Sarawak Chief Minister Abang Johari Openg at his office in the state assembly building to debrief him on the visit to Dr Mahathir.

Fadillah, now GPS’ chief whip in Parliament, did not elaborate on what the constraints were, but Economic Affairs Minister Mohamed Azmin Ali had said in Parliament in July that Petronas would go bankrupt if it acceded to oil-producing states Sarawak and Sabah’s demand for the 20% royalty to be paid based on gross production instead of net profit.

Azmin, in a written reply to Tuaran MP and Upko president Madius Tangau, who had asked him to clarify about PH’s promise to give a 20% royalty, had reiterated a similar position.

However, he promised to engage the oil-producing states in the debate that royalty should be based on gross production and not net profit.

Fadillah, however, said Sarawak had a strategy to overcome the deadlock.

He would not disclose what the strategy was, but hinted at it when he said that state oil company Petroleum Sarawak Berhad (Petros) was still in ongoing talks with national oil company Petronas over Petronas’ new role in Sarawak and what the oil-sharing formula should be.

Petronas, which has been told that it is no longer business as usual for them with the amendment to the state’s Oil Mining Ordinance (OMO) in July, has been given until the end of next year to draw up a resource-sharing formula acceptable to the state.

Sarawak, has stated it does not recognise the controversial federal Petroleum Development Act 1974 (PDA), which gives Petronas absolute rights over all oil and gas discoveries in the country.

Sarawak maintains the PDA had never been sanctioned by the state assembly as required by law and therefore could not be enforced in the state.

The state also reiterated its 60-year-old OMO, which gave the state 100% rights over oil and gas found in the territory, was never repealed or superseded by the PDA or any other laws.

In the amended OMO which came into force on July 1, Petronas and all oil and gas companies operating in the state must now apply for the mining and other appropriate licences from the state.

Petros, and not Petronas, will regulate the downstream and upstream of the oil and gas industry.

Fadillah also said the questions of the return of lost rights and compliance with Malaysia Agreement 1963, dilapidated schools in the state, the status of projects that were approved and budgeted in this year’s budget, and full recognition of the three territories – Sarawak, Sabah and Malaya – as “equal partners” in Malaysia were also brought up for discussion.

He said a committee, comprising members from the three territories, would be formed “to study the laws and agreements on it”.

“There will be further discussions as it is important to us (Sarawak).” – September 14, 2018.